The
Bar Council of India prohibits advocates from charging fees to their clients
contingent on the results of litigation or pay a percentage or share of the
claims awarded by the Court. Bar Council of India Rules: Part VI, Chapter II,
Section II, Rule 20 which reads as under:
“20. An
advocate shall not stipulate for a fee contingent on the results of litigation
or agree to share the proceeds thereof.”
Many
have the misconception that the reason why lawyers do not work on a contingency
basis is that such an agreement between the lawyer and client would be a
wagering one, and therefore are void. Apart from the Bar Council Rules which
have expressly prohibited it, in the landmark case of Ganga Ram v. Devi Das, 61 P.R. (1907), such an agreement was held to be void for
being against
public policy and also against professional ethics.
However,
although prohibited, in several cases, especially those before the lower
Courts, clients are charged on the percentage of claim amount that the lawyer
is able to recover. However, the practice though prevalent, has hardly led to
disputes and is can seldom be proved. Reason being that the contingency
agreement is always oral and highly informal. It must be remembered that such
an agreement is not only void but also would lead to the lawyer facing
disciplinary action by the Bar Council and a chance of losing one’s license to
practice at the Bar.
Contingency
fees exist in the civil realm because the attorney "attaches" their
fee to the resulting award; if there is no award, there is no fee. Many
states also bar attorneys from taking divorce cases on contingency for similar
reasons -- there's not an "award" but rather a separation of
property. Further, it's an ethical issue that could result in the attorney
preferring a plea bargain over going to trial, in order to further their
interest in securing payment from the client, rather than taking the client's
best interest. This isn't as much of a concern in the civil realm, because
someone's not going to prison; they're just settling a dispute between private
parties.
The
main reason for the express prohibition in the Bar Council of India Rules is
probably because lawyers must not be allowed to have ulterior interests in the
outcome of the case. They are considered to be of a ‘noble profession’, and are
officers of the Court. Their main objective must be Justice and not financial
gain.
If
they were interested in the matter, they might adopt unfair means or allow
their emotions to get the best of them. Sometimes, the Court may grant an
alternate remedy then the one paid for, which the contingency agreement does
not cover. In such case it is difficult to determine the lawyer’s fee. This may
lead to unimaginable amount of disputes between lawyer and client.
Although
theoretically this may seem like a very good reasoning, but in practice the
Contingency Fee system is a boon to poor clients. There must be several people
in India, who even though they have been wronged, do not take legal action
because of the legal expenses and the fear that even after somehow being able
to meet those expenses, still losing the suit. If the abovementioned rule is
removed from the Bar Council of India Rules, then this transaction can be
developed. Written and formal documents can come into existence with clear cut
clauses for every possible outcome, as well as whether out-of-pocket expenses
are also to be paid are also contingent
K.L. GAUBA VS UNKNOWN
This
is an application under our disciplinary jurisdiction against Mr. K. L. Gauba.
It came to the notice of this Court that Mr. Gauba, who is an advocate of this
Court, had entered into an agreement with his client, one Amarnath Bhardwaj,
which appeared to be champertous and this Court took the view that the
circumstances under which the said agreement had been entered into and the
terms of the agreement itself called for an investigation under the
disciplinary jurisdiction, and so it was decided to refer this case to the Bar
Council.
Accordingly,
on May 1, 1953, the learned Chief justice appointed three members of the Bar
Council to constitute a Tribunal under Section 11 of the Bar Councils Act for inquiring into
this case. Notice of the intended inquiry was served on Mr. Gauba in due
course. He appeared before the Bar Council Tribunal, gave his explanation on
July 10 and filed an additional statement on August 6, 1953. The matter was
then heard by the Members of the Tribunal and they made the report on December
16, 1953. The Tribunal has held that the respondent had entered into an
agreement with the client that he should be given half of the profits of the
litigation in case of success and this in the opinion of the Tribunal amounted
to professional misconduct. After this report was received, notice of the
hearing of the present application was served on Mr. Gauba and the matter has
thus come before us for final disposal.
It
would thus seem that the American decisions are based upon the statutory law
upon the subject as obtaining in America. In India, however, we have got the
provisions ofSection 23 of the Indian Contract Act according to which
the agreements like the agreement in this case being against public policy must
be deprecated. I, therefore, agree with my learned brother that Mr. Gauba's
conduct in this case was grossly unprofessional and most objectionable
Law Commission fails
The
Law Commission of India has failed to address the issue of excessive litigation
cost in the country which is predominantly the result of unfair levy of fees by
lawyers. In its 240th report (May 2012), the commission examined several
state rules on fees and strangely, pleaded for enhancement of fees! According
to the report, fee prescribed in the rules is ‘so meager’.
Rules
do not cover all types of cases or courts and, therefore, the major varieties
of fee are outside their ambit. Levying of fee by lawyers in India is not
by and large governed by any rules at all, and even in areas covered by the
rules, as in civil litigation, they are honored only in their
breach.
Ø The
public view of eminence in advocacy also needs to be changed.
The
artificial and luxurious misconceptions about professional greatness need to be
exposed and fairness in fixation of remuneration recaptured. While recognising
the labour behind research, travel and homework, the litigant also should be
guaranteed fairness in dealings. We are yet to realise the significance of
proper guidance and genuine legal consultation. It is reasonable to charge for
a fair advice after due consultation than charging exorbitantly for a fruitless
litigation based on an erroneous or casual advice.
The
country should change its litigation habits. More egalitarian and sophisticated
methods of dispute resolution like arbitration and conciliation are to be
encouraged in areas ranging from business to matrimonial disputes. The
iron wall between legal profession and society is only to be smashed and the
profession demystified. There is a real need to evolve a national movement for
fair advocacy which should take in lawmen as well as laymen from all the
states.
Types of Legal Fees:-
The
type of fee arrangement that you make with your lawyer will have a significant
impact on how much you will pay for the services. Legal fees depend on several
factors, including the amount of time spent on your problem; the lawyer's
ability, experience, and reputation; the novelty and difficulty of the case;
the results obtained; and costs involved. There will be other factors such as
the lawyer's overhead expenses (rent, utilities, office equipment, computers,
etc.) that may affect the fee charged.
There
are several common types of fee arrangements used by lawyers:
- Consultation Fee: The lawyer may charge a fixed or
hourly fee for your first meeting where you both determine whether the
lawyer can assist you. Be sure to check whether you will be charged for
this initial meeting.
- Contingency Fees: The lawyer's fee is based on a
percentage of the amount awarded in the case. If you lose the case, the
lawyer does not get a fee, but you will still have to pay expenses.
Contingency fee percentages vary. A one-third fee is common. Some lawyers
offer a sliding scale based on how far along the case has progressed
before it is settled. Courts may set a limit on the amount of a
contingency fee a lawyer can receive. This type of fee arrangement may be
charged in personal injury cases, property damage cases, or other cases
where a large amount of money is involved. Lawyers may also be prohibited
from making contingency fee arrangements in certain kinds of cases such as
criminal and child custody matters. Contingency fee arrangements are
typically not available for divorce matters, if you are being sued, or if
you are seeking general legal advice such as the purchase or sale of a
business.
- Flat Fees: A lawyer charges a specific, total fee. A flat fee is
usually offered only if your case is relatively simple or routine such as
a will or an uncontested divorce.
- Hourly Rate: The lawyer will charge you for
each hour (or portion of an hour) that the lawyer works on your case.
Thus, for example, if the lawyer's fee is $100 per hour and the lawyer
works 5 hours, the fee will be $500. This is the most typical fee
arrangement. Some lawyers charge different fees for different types of
work (legal research versus a court appearance). In addition, lawyers
working in large firms typically have different fee scales with more
senior members charging higher fees than young associates or paralegals.
- Referral Fee: A lawyer who refers you to
another lawyer may ask for a portion of the total fee you pay for the
case. Referral fees may be prohibited under applicable state codes of
professional responsibility unless certain criteria are met. Just like
other fees, the total fee must be reasonable and you must agree to the
arrangement. Your state or local bar association may have
additional information about the appropriateness of a referral fee.
- Retainer Fees: The lawyer is paid a set
fee, perhaps based on the lawyer's hourly rate. You can think of a
retainer as a "down payment" against which future costs are
billed. The retainer is usually placed in a special account and the cost
of services is deducted from that account as they accrue. Many retainer
fees are non-refundable unless the fee is deemed unreasonable by a court.
A retainer fee can also mean that the lawyer is "on call" to
handle your legal problems over a period of time. Since this type of fee
arrangement can mean several different things, be sure to have the lawyer
explain the retainer fee arrangement in detail.
- Statutory Fee: The fees in some cases may be
set by statute or a court may set and approve a fee that you pay. These
types of fees may appear in probate, bankruptcy, or other proceedings.
With
all types of fee arrangements you should ask what costs and other expenses are
covered in the fee. Does the fee include the lawyer's overhead and costs or are
those charged separately? How will the costs for staff, such as secretaries,
messengers, or paralegals be charged. In contingency fee arrangements, make
sure to find out whether the lawyer calculates the fee before or after
expenses.
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